Summit Financial Group Reports First Quarter 2018 Results

MOOREFIELD, W.Va., April 26, 2018 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ:SMMF) today reported first quarter 2018 net income of $7.44 million, or $0.60 per diluted share. In comparison, earnings for fourth quarter 2017 were $2.32 million, or $0.19 per diluted share, and for first quarter 2017, net loss of $1.62 million, or ($0.15) per diluted share. Earnings for first quarter 2018 were positively impacted by lower effective corporate income tax rate as result of enactment of the Tax Cuts and Jobs Act (“TCJA”) and by realized gains on sales of securities. Earnings per diluted share for fourth quarter 2017 were negatively impacted (on an after-tax basis) by the one-time charge of $0.28 to re-measure the Company’s net deferred tax assets as result of enactment of the TCJA. Summit’s first quarter 2017 net loss resulted principally from a legal settlement which reduced its earnings by $0.58 per diluted share.

H. Charles Maddy, III, President and Chief Executive Officer of Summit, commented, “I am very pleased to report that Summit achieved both record quarterly net income and record quarterly earnings per share for the quarter just ended. Further, I am particularly gratified by our continued robust lending activity and strong core operating performance, and I optimistically look forward to the remainder of the year and beyond as we seek to be a consistent, high-performing community banking institution.”

Results of Operations

Total revenue for first quarter 2018, consisting of net interest income and noninterest income, grew 36.5 percent to $22.1 million, principally as result of the FCB acquisition, compared to $16.2 million for the first quarter 2017.

For the first quarter of 2018, net interest income was $17.3 million, an increase of 26.6 percent from the $13.6 million reported in the prior-year first quarter and decreased $181,000 compared to the linked-quarter. The net interest margin for first quarter 2018 was 3.58 percent compared to 3.54 percent for the year-ago quarter, and 3.65 percent for Q4 2017. Enactment of the TCJA reduced our net interest margin by 6 basis points in Q1 2018 as compared to Q4 2017. Excluding the impact of accretion and amortization of fair value acquisition accounting adjustments related to the interest earning assets and interest bearing liabilities acquired from FCB and HCB, Summit’s net interest margin was 3.53 percent for Q1 2018.

Noninterest income, consisting primarily of insurance commissions from Summit's insurance agency subsidiary, trust and wealth management fees and service fee income from community banking activities, for first quarter 2018 was $4.88 million compared to $3.93 million for the linked-quarter and $2.58 million for the comparable period of 2017. Excluding realized securities gains and losses, noninterest income was $4.14 million for first quarter 2018, compared to $2.64 million reported for first quarter 2017 and $4.00 million for the linked quarter.

We recorded a $500,000 provision for loan losses during first quarter 2018 compared to $375,000 during fourth quarter 2017 and $250,000 for the year-ago quarter. The need for increased loan loss provisioning during Q1 2018 is principally the result of recent loan growth.

Q1 2018 total noninterest expense decreased 35.2 percent to $12.3 million compared to $19.0 million for the prior-year first quarter principally due to the $9.9 million litigation settlement to resolve fully all litigation with Residential Funding Company, LLC and ResCap Liquidating Trust (collectively “ResCap”) during Q1 2017. Excluding the impact of the ResCap litigation settlement charge, noninterest expense for Q1 2018 increased 35.1 percent to $12.4 million compared to $9.1 million for Q1 2017, principally as result of the acquisitions of HCB and FCB.

Balance Sheet

At March 31, 2018, total assets were unchanged from year-end 2017 at $2.13 billion. Total loans, net of unearned fees, were $1.64 billion at March 31, 2018, up $37.1 million, or 9.2 percent (on an annualized basis), from the $1.61 billion reported at year-end 2017. Loans, excluding mortgage warehouse lines of credit, grew $42.7 million during the quarter, or 12.3 percent (on an annualized basis).

At March 31, 2018, deposits were $1.65 billion, an increase of $53.9 million, or 3.4 percent, since year end 2017. During Q1 2018, checking deposits increased $38.4 million or 6.1 percent, time deposits grew by $26.8 million or 4.4 percent and savings deposits decreased $11.2 million or 3.1 percent.

Shareholders’ equity was $204.7 million as of March 31, 2018 compared to $201.5 million at December 31, 2017.

Tangible book value per common share increased to $14.36 at March 31, 2018 compared to $14.08 at December 31, 2017. Summit had 12,366,360 outstanding common shares at March 31, 2018 compared to 12,358,562 at year end 2017.

Asset Quality

As of March 31, 2018, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were unchanged from year end 2017 at $36.9 million, or 1.73 percent of assets.

First quarter 2018 net loan charge-offs were $807,000, or 0.20 percent of average loans annualized; while we added $500,000 to the allowance for loan losses through the provision for loan losses. The allowance for loan losses stood at 0.75 percent of total loans at March 31, 2018, compared to 0.78 percent at year-end 2017. If the acquired FCB and HCB loans which were recorded at fair value on the acquisition dates are excluded, the allowance for loan losses to total loans ratio at March 31, 2018 and December 31, 2017 would have been 0.85 percent and 0.91 percent, respectively.

About the Company

Summit Financial Group, Inc. is a $2.13 billion financial holding company headquartered in Moorefield, West Virginia. Summit provides community banking services primarily in the Eastern Panhandle and Southern regions of West Virginia and the Northern, Shenandoah Valley and Southwestern regions of Virginia, through its bank subsidiary, Summit Community Bank, Inc., which operates thirty banking locations. Summit also operates Summit Insurance Services, LLC in Moorefield, West Virginia and Leesburg, Virginia.

FORWARD-LOOKING STATEMENTS

This press release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Words such as “expects”, “anticipates”, “believes”, “estimates” and other similar expressions or future or conditional verbs such as “will”, “should”, “would” and “could” are intended to identify such forward-looking statements.

Although we believe the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially. Factors that might cause such a difference include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking laws and regulations; changes in tax laws; the impact of technological advances; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; and changes in the national and local economies. We undertake no obligation to revise these statements following the date of this press release.

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